Open banking, a fancy name for giving banking customers direct (API-based) control over how their data is released to third-parties, is trending globally. In theory, open banking enables the creation of new financial products and services, as well as easy integrations with third-party developers. It’s not new. So why are we hearing about it now?
This new interest in open banking is a direct response to two things: President Biden’s July 2021 Executive Order on Promoting Competition in the American Economy and the incumbent financial system’s need to respond to the threat of DeFi.
In practice, the current financial system scales, works perfectly, and protects consumers with a fair amount of government regulation and insurance. If you (or your banker) make a mistake, you have a reasonable expectation of getting your money back. These are great benefits.
The strength of open banking is that it is brought to you by central authorities. From a DeFi perspective, that’s its greatest weakness.
It’s time to learn about open banking and what it may mean for the emerging conflict between traditional fintech and DeFi.
Author’s note: This is not a sponsored post. I am the author of this article and it expresses my own opinions. I am not, nor is my company, receiving compensation for it.